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Texas Physician Non-compete Agreements: Four Common Flaws that Make them Unenforceable.

Texas is one of the few states that allows physician non-compete agreements.  Physician non-compete provisions frequently appear in employment agreements with hospitals and practice groups.  With the growth of office sharing and doctor-owned hospitals, physicians can expect to see such clauses in office share and corporate or partnership documents.   So what is a Texas physician to do when things are not working out at the office or hospital?

Start by looking over your agreements.  If you find a provision that limits your ability to start your practice after you leave, you have found your non-compete provision.  Having found a non-compete provision, determine if it has any of the following four common flaws .

No buyout :   To be enforceable against a physician, the non-compete must include a buy-out provision.   The provision must be based on a reasonable price.  The buy-out provision may allow for a price set by an agreed-upon  or court-appointed arbitrator with authority to bind the parties.  A physician non-compete without a buy-out provision does not comply with the statute and is therefore not enforceable.

No Patient Lists/Or Medical Information Access:   The patient’s choice of physician is a paramount consideration of the Texas legislature.  This choice is reflected in the statutory requirement that a physician’s non-compete agreement  must allow the physician access to a list of her patients seen or treated within one year of the termination of the contract or employment.   The non-compete must also allow the physician to have access to those patient’s medical records in a format in which they are normally maintained (except by mutual agreement of the parties).  If the non-compete denies the physician access to her patient list or medical records of those consenting patients, it is not enforceable against the physician.

No Separate Consideration:   Every non-compete agreement must have separate consideration.  The physician must receive some consideration specifically for her agreement not to compete.  Typically, this consideration shows up in the form of access to confidential information, specialized training, or ownership in a venture (think goodwill).  Without consideration specifically for the non-compete, it is not enforceable.

Overly broad Restrictions:   Overly broad restrictions are the bane of any non-compete.   Like all non-compete agreements, the physician non-compete limitation must be reasonable in scope (think area of medicine), geography, and time.  The restriction on the physician’s practice after employment should only be broad enough to protect the consideration the physician received to secure the non-compete.   For example, a physician working in a practice group that services patients in the Dallas area primarily in two hospitals could not force a departing physician to leave the state of Texas entirely for several years in order to practice medicine.   Rather, one year restrictions within a limited geographical basis (say 10-15 miles) of the practice group and the hospitals in which it focuses would generally meet the requirements.

The only person that really knows whether your non-compete agreement is enforceable is usually wearing a black robe and has a gavel.   That being said, knowing these four common flaws could arm you with the ammunition you need in negotiations or discussions when you leave the practice group or hospital.